Advance Auto Parts 2004 Annual Report Download - page 50

48
Notes฀to฀Consolidated฀Financial฀Statements฀(continued)
For฀the฀Years฀Ended฀January฀1,฀2005,฀January฀3,฀2004,฀and฀December฀28,฀2002฀(in฀thousands,฀except฀per฀share฀data)
฀ Other฀ financial฀ information฀ related฀ to฀ the฀ Plan฀ was฀
determined฀by฀the฀Company’s฀independent฀actuaries.฀The฀
measurement฀date฀used฀by฀the฀actuaries฀was฀October฀31฀of฀
each฀fiscal฀year.฀The฀following฀provides฀a฀reconciliation฀of฀
the฀accrued฀benefit฀obligation฀included฀in฀other฀long-term฀
liabilities฀ in฀ the฀ accompanying฀ consolidated฀ balance฀
sheets,฀ recorded฀ and฀ the฀ funded฀ status฀ of฀ the฀ Plan฀ as฀ of฀
January฀1,฀2005฀and฀January฀3,฀2004:
2004 2003
Change฀in฀benefit฀obligation:
฀ ฀Benefit฀obligation฀at฀beginning฀฀
฀ of฀the฀year฀.............................................. $22,750 $23,002
฀ Service฀cost฀................................................ 25
฀ Interest฀cost฀................................................ 1,004 1,485
฀ Benefits฀paid฀.............................................. (1,239) (3,336)
฀ Plan฀amendment฀........................................ (7,557) —
฀ Actuarial฀(gain)฀loss฀.................................. (335) 1,594
฀ Benefit฀obligation฀at฀end฀of฀the฀year฀......... 14,625 22,750
Change฀in฀plan฀assets:
฀ ฀Fair฀value฀of฀plan฀assets฀at฀beginning฀฀
฀ of฀the฀year฀.............................................. ——
฀ Employer฀contributions฀............................. 1,239 3,336
฀ Participant฀contributions฀........................... 2,485 1,779
฀ Benefits฀paid฀.............................................. (3,724) (5,115)
฀ Fair฀value฀of฀plan฀assets฀at฀end฀of฀year฀.... ——
Reconciliation฀of฀funded฀status:
฀ Funded฀status฀............................................. (14,625) (22,750)
฀ Unrecognized฀transition฀obligation฀.......... —9
฀ Unrecognized฀prior฀service฀cost฀............... (7,112) —
฀ Unrecognized฀actuarial฀loss฀...................... 4,371 5,362
Accrued฀postretirement฀benefit฀cost฀............. $(17,366) $(17,379)
฀ Net฀periodic฀postretirement฀benefit฀cost฀is฀as฀follows:
2004 2003 2002
Service฀cost฀.......................................... $฀ 2 $฀ 5 $฀ 473
Interest฀cost฀.......................................... 1,004 1,485 1,239
Amortization฀of฀the฀transition฀฀
฀ obligation฀......................................... —1 58
Amortization฀of฀the฀prior฀฀
฀ service฀cost฀...................................... (436) — —
Amortization฀of฀recognized฀฀
฀ net฀losses฀(gains)฀............................. 250 146 (89)
$฀ 820 $1,637 $1,681
฀ The฀ health฀ care฀ cost฀ trend฀ rate฀ was฀ assumed฀ to฀ be฀฀
14.0%฀ for฀ 2005,฀ 12.5%฀ for฀ 2006,฀ 11.5%฀ for฀ 2007,฀ 10.0%฀
for฀2008,฀9.5%฀for฀2009,฀8.5%฀for฀2010฀and฀5.0%฀to฀8.0%฀
for฀ 2011฀ and฀ thereafter.฀ If฀ the฀ health฀ care฀ cost฀ were฀
increased฀1%฀for฀all฀future฀years฀the฀accumulated฀post-
retirement฀ benefit฀ obligation฀ would฀ have฀ increased฀ by฀
$1,247฀as฀of฀January฀1,฀2005.฀The฀effect฀of฀this฀change฀on฀
the฀combined฀service฀and฀interest฀cost฀would฀have฀been฀an฀฀
increase฀ of฀ $102฀ for฀ 2004.฀ If฀ the฀ health฀ care฀ cost฀ were฀
decreased฀ 1%฀ for฀ all฀ future฀ years฀ the฀ accumulated฀ post-
retirement฀ benefit฀ obligation฀ would฀ have฀ decreased฀ by฀
$1,318฀as฀of฀January฀1,฀2005.฀The฀effect฀of฀this฀change฀on฀
the฀combined฀service฀and฀interest฀cost฀would฀have฀been฀a฀
decrease฀of฀$121฀for฀2004.
฀ The฀ postretirement฀ benefit฀ obligation฀ and฀ net฀ periodic฀
postretirement฀ benefit฀ cost฀ were฀ computed฀ using฀ the฀ fol-
lowing฀weighted-average฀discount฀rates฀as฀ determined฀ by฀
the฀Company’s฀actuaries฀for฀each฀applicable฀year:
2004 2003
Weighted-average฀discount฀rate฀.............................. 5.75% 6.25%
฀ The฀Company฀expects฀plan฀contributions฀to฀completely฀
offset฀ benefits฀ paid.฀ The฀ following฀ table฀ summarizes฀ the฀
Company’s฀expected฀benefit฀payments฀(net฀of฀retiree฀con-
tributions)฀to฀be฀paid฀for฀each฀of฀the฀following฀fiscal฀years:
Amount
2005........................................................................................... $1,340
2006........................................................................................... 1,050
2007........................................................................................... 1,145
2008........................................................................................... 1,160
2009........................................................................................... 1,191
2010–2014................................................................................. 5,101
฀ The฀Company฀reserves฀the฀right฀to฀change฀or฀terminate฀
the฀ benefits฀ or฀ contributions฀ at฀ any฀ time.฀ The฀ Company฀
also฀continues฀to฀evaluate฀ways฀in฀which฀it฀can฀better฀man-
age฀ these฀ benefits฀ and฀ control฀ costs.฀ Any฀ changes฀ in฀ the฀
Plan฀or฀revisions฀to฀assumptions฀that฀affect฀the฀amount฀of฀
expected฀future฀benefits฀may฀have฀a฀significant฀impact฀on฀
the฀amount฀of฀the฀reported฀obligation,฀annual฀expense฀and฀
projected฀benefit฀payments.
19.฀Equity฀Compensation
฀ During฀ fiscal฀ 2004,฀ the฀ Company฀ established฀ the฀
Advance฀Auto฀Parts,฀Inc.฀2004฀Long-Term฀Incentive฀Plan,฀
or฀ the฀ LTIP,฀ which฀ was฀ approved฀ at฀ its฀ 2004฀ Annual฀
Meeting฀of฀Stockholders.฀The฀LTIP฀was฀created฀to฀enable฀
the฀Company฀to฀continue฀to฀attract฀and฀retain฀team฀mem-
bers฀of฀exceptional฀managerial฀talent฀upon฀whom,฀in฀large฀
measure,฀ its฀ sustained฀ progress,฀ growth฀ and฀ profitability฀
depends.฀The฀LTIP฀replaces฀the฀Company’s฀previous฀senior฀
executive฀ stock฀ option฀ plan฀ and฀ executive฀ stock฀ option฀
plan.฀The฀stock฀options฀that฀remained฀available฀for฀future฀
grant฀ under฀ these฀ predecessor฀ plans฀ became฀ available฀
under฀the฀LTIP฀and฀thus฀no฀stock฀options฀will฀be฀available฀
for฀grant฀under฀those฀plans.฀The฀stock฀options฀authorized฀
to฀be฀granted฀are฀non-qualified฀stock฀options฀and฀terminate฀
on฀the฀seventh฀anniversary฀of฀the฀grant฀date.฀Additionally,฀฀